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Volatility, financial constraints, and trade

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  • García-Vega, María
  • Guariglia, Alessandra
  • Spaliara, Marina-Eliza

Abstract

We construct a dynamic monopolistic competition model with heterogeneous firms to study the links between firms' earnings volatility, their degree of financial constraints, their survival probabilities, and their export market participation decisions. Our model predicts that more volatile firms are more likely to face financial constraints and to go bankrupt, need to be more productive to stay in the market, and have more incentives to start exporting. A further implication is that through market diversification, exports tend to stabilize firms' total sales. These predictions are supported by our empirical tests, which are based on a panel of 23,674 UK firms.

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Bibliographic Info

Article provided by Elsevier in its journal International Review of Economics & Finance.

Volume (Year): 21 (2012)
Issue (Month): 1 ()
Pages: 57-76

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Handle: RePEc:eee:reveco:v:21:y:2012:i:1:p:57-76

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Web page: http://www.elsevier.com/locate/inca/620165

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Keywords: Firm-level volatility; Financial constraints; Firm survival; Exports;

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Citations

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Cited by:
  1. Andrea Caggese & Vicente Cuñat, 2011. "Financing constraints, firm dynamics, export decisions, and aggregate productivity," LSE Research Online Documents on Economics 43160, London School of Economics and Political Science, LSE Library.
  2. Simona Mateut & Alessandra Guariglia, . "Inventory Investment, Global Engagement, and Financial Constraints in the UK: Evidence from Micro Data," Discussion Papers 09/09, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
  3. Pierluigi Murro, 2013. "The Determinants Of Innovation: What Is The Role Of Risk?," Manchester School, University of Manchester, vol. 81(3), pages 293-323, 06.
  4. Lin, Jane-Raung & Wang, Chia-Jane & Chou, De-Wei & Chueh, Fei-Chun, 2013. "Financial constraint and the choice between leasing and debt," International Review of Economics & Finance, Elsevier, vol. 27(C), pages 171-182.

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